Gold Can’t Escape Greece’s Shadow

Published on Monday, 06 February 2012 17:31 Written by Todd Shriber

New York, February 6^th (TradersHuddle.com) – As was the case with oil today, gold just could not find a way to separate itself from more glum headlines pertaining to Greece and that sent the yellow metal lower by $15.40, or 0.9%, to a close of $1,724.90 a troy ounce. With Greece a month away from default, policymakers are still working to find a solution to the ordeal that has plagued global financial markets for well over a year, but little progress on that front plagued gold and lifted the fortunes of the U.S. dollar, albeit moderately. The PowerShares DB US Dollar Index Bullish (NYSE: UUP) closed higher by a penny.

Taking its cues from gold, silver also traded lower on the day, but the loss endured by the iShares Silver Trust (NYSE: SLV) was only a penny and that’s palatable to most traders. Keep in mind that the year-to-date gains for SLV and gold ETFs such as the SPDR Gold Shares (NYSE: GLD) and the iShares Gold Trust (NYSE: IAU) are still in the impressive category and nothing moves up in a straight line. Not to mention, really noting besides the dollar moves higher when Greece is in the spotlight.

There’s more good news for silver bulls. In an interview with the Wall Street Journal, Graham Leighton, director of precious metals trading at Newedge, said the current gold/silver ratio of 51 (it takes 51 ounces of silver to buy one ounce of gold) would likely strengthen in silver's favor "quite significantly." Some experts have forecast a gold/silver ratio of 25:1 in the coming years with gold trading up to $5,000 an ounce and silver at $200 an ounce.

Those are lofty numbers and could take years to materialize, but silver is likely headed higher in the near-term as long as U.S. economic data points remain bullish. Among the other precious metals, the ETFS Physical Platinum Shares (NYSE: PPLT) eked out a gain on the day while the ETFS Physical Palladium Shares (NYSE: PALL) suffered a small loss.

Not to sound an alarmist because it is just one day, but the miners were much weaker than the underlying metals today on a percentage basis. The Global X Silver Miners ETF (NYSE: SIL) lost nearly 1% while the Market Vectors Gold Miners ETF (NYSE: GDX) was off half a percent. With a loss of 1.4%, the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) was the worst offender of the group, but all three ETFs fell on lower-than-average volume.

The iPath DJ-UBS Copper TR Sub-Index ETN (NYSE: JJC) gave up 1% on light volume and that ETN is struggling to stay above its 200-day moving average.